Taxable Estates

Key Idea: By being charitable at death you can leave more for your family.

The estate tax is a voluntary tax. Individuals may currently pass along $2 million* to their heirs with no estate tax. Everything above that mark is taxed by the federal government and some states at a rate totaling nearly 50 percent.

The IRS thinks of your death as a taxable event. If you have more than $2 million in wealth (per individual) and haven't properly planned, it is a taxable event. What many people don't know is that you have a choice in how your wealth is ultimately distributed.

If given that choice, which of the following would you choose?

  • Choice #1 - Pass along the first $2 million* ($4 million for a married couple) in wealth to your heirs then pay half of what is left in taxes.
  • Choice #2 - Pass along the first $2 million* ($4 million for a married couple) to your heirs. Make wonderful gifts to the organizations you care about. Lower your income taxes during life. Pay little or nothing to the government at your death, and reduce or eliminate estate tax liability.

A Real Life Example

Jim and Millie are real donors. When they were given those choices, they decided to amend their current plans so they'd be investing more of their wealth in God's eternal kingdom.

Their situation:

  • Jim and Millie have a total estate value of $9 million.
  • The planning they had already done left them with an estate tax bill, due upon their death, or $2.5 million, with no benefit to the organizations that had made a difference in their lives.

Their new plan provides:

  • No estate taxes.
  • The kids get more inheritance.
  • A significant increase in support for causes that matter to them.
Results Estate Tax Owed Estate Tax Owed Inheritance to Kids Gifts to Charity at Death
New Plan $0 $0 $7,000,000 $3,000,000
Old Plan $2,500,000 $3,000,000 $7,000,000* $0

*Assumes $2 million per person estate tax exclusion of January 2006.

Please contact us to learn more.

The information contained herein is for explanatory purposes only and is not intended to be used as tax or legal advice. The Young Life Foundation recommends that you contact a professional tax advisor who can provide you with additional information on how the use of the above techniques and ideas may apply to your personal tax situation.